CarMax Inc.

Supply chain and procurement · Supplier financial distress and capability

We rely on third-party vendors for key components of our business. Many components of our business, including data management, key operational and technology processes and critical customer systems, are provided by third parties. One or more of these third-party vendors may experience financial distress, technology challenges, cybersecurity incidents, staffing shortages, liquidity challenges, file for bankruptcy protection, go out of business.

Human capital and workforce · Talent acquisition and retention

Our success depends upon the continued contributions of our associates. Our associates are critical to our success, and our culture is an important differentiator. Cost-reduction initiatives, workforce reductions and changes to our workplace model may affect our ability to attract and retain qualified personnel.

Supply chain and procurement · Supplier operation and dependance

A reduction in the availability of, or access to, sources of inventory, including parts used to recondition inventory, could have a material adverse effect on our business, sales and results of operations.

Project and contract management · Project execution and delivery risks

Our failure to manage our growth and the related challenges could have a material adverse effect on our business, sales and results of operations. Our growth is dependent on the success of our omni-channel platform, opening stores in new and existing markets, continued sales growth, the build-out of our offsite production and auction facilities.

Cybersecurity and data protection · Data breaches and cyber attacks

We collect sensitive confidential information from our customers. A breach of this confidentiality, whether due to a cybersecurity or other incident, could result in harm to our customers and damage to our brand. We collect, process and retain sensitive and confidential customer information in the normal course of business and may share that information with our third-party service providers.

Digital transformation and innovation · Digital transformation and modernization

A failure to capture the benefits that we expect from the platform or these initiatives and our continued investments in enhancements to the platform or in these initiatives could have a material adverse effect on our business, sales and results of operations. We must anticipate and meet our customers' expectations in an evolving retail marketplace.

Digital transformation and innovation · Technology implementation and upgrades

Our failure to realize the benefits associated with our omni-channel platform or initiatives designed to leverage evolving technologies, including AI, could have a material adverse effect on our business, sales and results of operations. We have made and may continue to make considerable investments in our omni-channel platform, as well as investments in initiatives designed to leverage evolving technologies, including AI.

Legal and litigation · Litigation and legal proceedings

We are subject to various legal proceedings. If the outcomes of these proceedings are adverse to CarMax, it could have a material adverse effect on our business, results of operations and financial condition. We are subject to various litigation matters from time to time, which have in the past and could in the future have a material adverse effect on our business, results of operations and financial condition.

Tax and financial reporting · Financial reporting and accounting standards

Our results of operations and financial condition are subject to management's accounting judgments and estimates, as well as changes in accounting policies. The preparation of our financial statements requires us to make estimates and assumptions affecting the reported amounts of CarMax's assets, liabilities, revenues, expenses and earnings.

Data and privacy · Data protection and privacy laws

We are subject to numerous and rapidly changing federal, state, and local laws and regulations regarding privacy, cybersecurity, and the collection, use, and disclosure of sensitive confidential information. If we fail to comply with these laws and regulations or future applicable laws and regulations, we could suffer reputational harm and disruption to our business.

Reputation and brand · Esg environmental social governance performance

We are subject to evolving regulations, disclosure requirements, standards and expectations relating to environmental, social and governance matters. Failure to satisfy these regulations, requirements, standards and expectations could adversely affect our business, sales, results of operations and financial condition.

Reputation and brand · Social media and digital reputation

The widespread use of social media and other digital platforms has increased the speed and scale at which information and misinformation can be disseminated, and we may not be successful in correcting or mitigating negative perceptions. Any resulting damage to our reputation or brand could have a material adverse effect on our business, sales and results of operations.

Reputation and brand · Corporate social responsibility

We have communicated certain environmental goals that are subject to related disclosure requirements. Failure to meet environmental goals or satisfy disclosure requirements could adversely affect our business, sales, results of operations and financial condition.

Natural and catastrophic events · Climate change and environmental impact

Further, as the Earth's climate changes, extreme weather events have become more frequent or more intense, which could have a material adverse effect on our sales and results of operations.

Economic and market conditions · Inflation and deflation pressures

These conditions include, but are not limited to, economic downturn, recession, inflation, interest rates, unemployment levels, the state of the housing market, gasoline prices, consumer credit availability, consumer credit delinquency and loss rates.

Economic and market conditions · Economic recession and downturns

The automotive retail industry in general and our business in particular are sensitive to economic conditions. We are subject to national and regional U.S. economic conditions. These conditions include, but are not limited to, economic downturn, recession, inflation, interest rates, unemployment levels, the state of the housing market, gasoline prices, consumer credit availability, consumer credit delinquency and loss rates.

Geopolitical and trade · International conflicts and tensions

When these economic conditions worsen or stagnate (as, for example, the current conflict in the Middle East and the resulting increase in the price of gasoline in the U.S.), it can have a material adverse effect on consumer demand for vehicles generally.

Market position and competition · Competitive pressure and market share loss

We operate in a highly competitive industry. Failure to develop and execute strategies to compete in the used vehicle marketplace and to adapt to the increasing use of digital and online tools to market, buy, sell and finance used vehicles could adversely affect our business, sales and results of operations. Automotive retailing is a highly competitive and fragmented business. Our competition includes publicly and privately owned new and used car dealers and online and mobile sales platforms, as well as millions of private individuals.

Market position and competition · Pricing pressure and margin compression

Increased online used vehicle offerings and the growing consumer trend of buying vehicles online adds competition in a segment that is growing and could result in lower-than-expected retail margins, and could have a material adverse effect on our business, sales and results of operations.

Strategic execution · Merger acquisition and divestiture risks

Our failure to realize the benefits associated with our strategic investments, including actual or potential acquisitions, could have a material adverse effect on our business, sales and results of operations and we may incur impairment losses on our strategic investments in equity securities.